WPP Group Buys 24/7 Real Media for $649 Million

British advertising powerhouse WPP announced Thursday it is acquiring Internet ad company 24/7 Real Media for $649 million. Microsoft was also rumored to be a suitor. WPP will pay $11.75 per 24/7 share, a 4% premium to the company's Wednesday close. The deal is expected to close in July. WPP expects the deal to hurt earnings in 2007 and 2008 by approximately 1% and anticipates $5 million in cost savings. 24/7's shares have appreciated almost 45% over the past two months on buyout speculation as consolidation heats up in the online ad space. Last month, Google agreed to buy online ad broker DoubleClick for $3.1 billion and Yahoo bought a remaining stake in Right Media Inc. for $680 million. French company Publicis Groupe has announced it will buy online ad company Digitas for $1.3 billion, and AOL is planning to buy the German company Adtech. "The real catalyst to this was the Google-DoubleClick move," said WPP CEO Sir Martin Sorrell. eMarketer senior analyst David Hallerman: "Offline agencies need the online ad companies for the technology...It’s the most complex form of advertising." 24/7 shares gained over 3% to close at $11.61 Thursday. The last remaining publicly traded online ad companies of scale are ValueClick and aQuantive; their shares gained 2.1% and 4.3% respectively. WPP's ADRs dropped over 2% to $73.24.

Sources: Press release, Wall Street Journal, Forbes, Red Herring, MarketWatch
Commentary: WPP - 24/7 Real Media Rumors: A Deal Makes Sense • 24/7 Real Media Loss Narrows but Misses; Hires Lehman, Shares Jump • 24/7 Real Media Is Considering “Strategic Alternatives”
Stocks/ETFs to watch: 24/7 Real Media, Inc. (TFSM), WPP Group plc [ADR] (WPPGY), aQuantive Inc. (AQNT), ValueClick Inc. (VCLK), Microsoft Corp. (MSFT), Google Inc. (GOOG), Yahoo! Inc. (YHOO).
Conference call transcripts: 24/7 Real Media Q1 2007

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